Your “global” fund might not be global at all

You probably don’t expect to buy a global fund and have 70-80% of your capital in one country. Now most single country funds have written in their prospectus so they can invest 20% or so outside of the name of the country on the fund. So even if they don’t use it, so you can argue that most global funds today, most tracker funds, for example, look more like a US fund than a global fund.

And then the same is also true for income. You might buy an income fund expecting it to do something different to the growth funds or the passive trackers that you have in your portfolio already. You probably don’t expect your income fund to own the companies that are in those products which are often ones that, you know, don’t pay any dividends or barely pay yield at all.

I think the reason so many, you know, income strategies today own companies that pay barely any dividends and global companies own so much in the US is the benchmark they’re measured against has become so concentrated and they try to stick to that or stick relatively close to it. You can measure the concentration in lots of ways.

I seem to see research through my inbox every day that says, you know, the market’s have only been this concentrated before in the dot-com bubble or in the nifty 50 period or something. I think Japan is the second biggest weight in the global index and that’s only about 5% versus the 70% or so that’s in the US and the biggest single company in the index is Nvidia, which is also 5%. So that gives a sort of a sense of how concentrated we are.

Concentration’s great when the biggest companies are doing well and concentration is increasing. Well, it’s great for passive products at least but it’s not much fun when the opposite is true.

For us, one of the key things we do is we don’t construct the portfolio by beginning with the benchmark and then trying to spread away from it. It’s very much done from a blank sheet of paper. And you know, I tie it back to the Ronseal test I mentioned, you know, the fund is called the Fidelity Global Dividend fund. So we think it’s important that we own companies that span a range of geographies – hence the global – and that everything in the fund pays a decent dividend so that investors are getting what it says on the tin.